Facts Jessie Conerly and Ramon Jarrell signed a letter of intent to enter into a business venture and form a limited liability company, K & M, LLC. They planned to buy land from Marion Clay & Gravel, LLC, and extract and sell the natural resources of sand, gravel, and clay from it. Jarrell would own 48 percent of the company and secure $6.8 million in start-up capital for the purpose of buying out the four members of Marion Clay. Jarrell would also receive 50 percent of the profits, provide oversight, and have access to all records and aspects of the operation. Conerly would own 52 percent of K & M, be responsible for daily operational management and oversight, and receive 50 percent of the profits. After the letter-of-intent agreement, Jarrell began advancing capital to Conerly. Conerly issued four promissory notes (for the principal amounts of $40,000, $20,000, $22,000, and $22,000) naming Jarrell as the payee. Two years later, Jarrell filed a lawsuit in a Louisiana state court against Conerly for failing to pay the balance due on the notes. Conerly claimed several defenses to the notes, including lack of consideration, but the trial court held that Jarrell was an HDC, which precluded Conerly from asserting these defenses. The trial court granted a partial summary judgment to Jarrell in the amount of $104,000. Conerly appealed. Issue Was Jarrell, the payee on the promissory notes, an HDC of the notes? Decision No. The state intermediate appellate court held that Jarrell was not an HDC on the four promissory notes. Therefore, Conerly was entitled to present his legitimate defenses. The court reversed the lower court's summary judgment and remanded the case for further proceedings. Reason According to the court, although a payee on a promissory note can be an HDC, that status is not automatic. "When the payee deals with the maker through an intermediary . . . and does not have notices of defenses, such an isolated payee may take as a holder in due course." Normally, however, a payee who has had constant, direct, and meaningful contact with the maker will not be an HDC. A payee in this situation will usually have notices of defenses and claims by virtue of the fact that he has dealt directly with the maker. In this case, Jarrell had direct and meaningful contact with Conerly, and the notes were relating to financing a company that he helped found, worked for, and partially owned. Given Jarrell's status as a payee, and his personal involvement in the formation and operation of the business venture, Jarrell is not a holder in due course. "Because Jarrell is not a holder in due course, the notes are subject to the defenses advanced by Conerly, such as failure of consideration."

What If the Facts Were Different? If Jarrell had simply invested in K & M, but was not a co-owner and did not interact with Conerly, how might this have affected the outcome of this case?